Michelin’s share price is €56.99. You wish to value the company’s equity and compare your valuation to the share price. The dividend that has just been paid is €1.78 and the earnings per share is €7.96. From FT.com, the return on equity for Michelin is 18.66 per cent. There are a number of estimated growth rates for the firm and these are given below:

What is Michelin’s estimated discount rate for each growth rate? Which estimate makes most sense and why? Using your chosen discount rate, value the company based on your own growth rate calculation.

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Source DPS growth (5 yr) EPS growth (5 yr) EPS growth (1 yr) DPS growth (1 yr) Growth Rate (%) 9.52 16.85 16.01 17.98